Monday, October 31, 2011

Premature Celebration

Memo to Washington: This is what happens when Democrats and Republicans stop sniping, stop campaigning and work together for the greater good. Last week, the state Treasury Department calculated that the reforms of public worker benefits, passed in June, will save local governments $267 million this year in pension payments.

New Jersey faced a $120 billion pension and health shortfall, one of the largest in the nation. Along with starving the state budget, those costs are powerful drivers of local property taxes. The reforms are real savings, and they didn’t come easily.

The unfunded liability — the difference between how much the pension system has and what has been promised to current and future retirees — dropped from $53.9 billion to $35.4 billion after the law was signed, according to state bond documents.

But it’s about to swell again. And that’s because both parties agreed to delay the day or reckoning by phasing in full payments over a seven-year stretch. That is the underbelly of this reform; they rigged the payment schedule to soften the blow in the short term.

So this year, the state should be paying roughly $3.3 billion into the pension fund, but will chip in only $468 million. Shorting the fun like that will cause the pension gap to swell to $58 billion by 2019, according to the state’s estimates.

In other words, the hole will get deeper before the state starts climbing out.

In fiscal 2018, taxpayers will have to make a $5 billion payment — more than 10 times what it is paying this year and one-sixth of this year’s total budget. Unless a cash-filled meteor crashes in Trenton, taxes likely will have to increase to make the balloon payments.

Wow - isn't it amazing how this bill went from being the savior of New Jersey to being a millstone around its neck in less than a month?

Of course, we can just ignore how cutting public worker pay (which is what this is - don't let anyone try to tell you otherwise) will chase off well qualified people from a career in public service. That's a "crisis" the S-L can write about in a few years, when the facts of how it was created are long forgotten.